The announcement on the 6th November that ExxonMobil are to be investigated by the New York state attorney-general for misleading the public and investors regarding climate change risks, marks the start of a new chapter in the need for oil and gas companies to face up to the reality of climate change.
Reported in the UK Financial Times, ExxonMobil is being investigated for claims it misled investors over the nature and risks of climate change and funded groups that criticised research on climate change. The FT also reports that the investigation has the potential to widen to include other oil and gas companies.
The ExxonMobil investigation comes only a month after Mark Carney, Governor of the Bank of England announced that investors faced “potentially huge losses” from climate change risks, which could make vast reserves of oil and gas “literally unburnable”. He suggested that urgent action was required for companies to provide information on the carbon intensity of their assets, in order for investors to be clear about the financial risks in a business. Doing so would support a transparent approach so that investors could consider climate change risks along with other risks when making investment choices. Without such reporting “a wholesale reassessment of [investment] prospects, especially if it were to occur suddenly, could potentially destabilise markets” he said.
This thinking builds upon work done by several bodies including Carbon Tracker, a financial think tank focused on aligning capital market actions with climate reality, who have highlighted that if we are to limit global average temperature rise to 2°C, then the available carbon budget means leaving much of our oil and gas reserves in the ground. These same reserves are on the balance sheets of large oil and gas corporations.
Oil and Gas industry leadership is now required to effectively report the CO2 emissions associated with booked reserves. This along with other adaptation measures provides the only way forwards for oil and gas resource holders to transition to the new low carbon reality.
The time has come for the oil and gas sector to face up to climate change reality and adapt to a low carbon future, or risk the consequences of not doing so.